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Six Ways to Transfer Assets

Posted January 2017

Eventually we all will give away everything we own, but we have a choice as to how to make those transfers. There are six ways to transfer assets, five of which can be used to make charitable gifts. Here is an explanation of the methods:

1. Lifetime giftsThe most common transfers, of course, are lifetime gifts—ranging from modest presents to your loved ones in celebration of special occasions to substantial amounts for special situations (such as giving an adult child the down payment on a house or seed money for a new business). You may, of course, make charitable gifts to us during your lifetime, either outright or through a plan such as a charitable remainder trust that pays you and/or another person income for life. We can provide an illustration showing both the tax benefits and the projected income.

2. Bequest in a willAt the end of life, property is typically transferred through a bequest in a will. Keep in mind that a will does not govern all property; it distributes: property owned in your name alone; your one-half of community property if you live in one of the nine community-property states; property owned by you and others as tenants-in-common; and payments or proceeds payable to your estate because of your death. If you wish to make an end-of-life legacy gift, you may include a provision for us in your will.

3. Provision in a living trustA similar way to transferring property via a will is through a provision in a living trust. Assets placed in a living trust go directly to named beneficiaries without being subject to probate, which refers to the procedure by which assets governed by a will are distributed. Even if you have a living trust, you should also have a will to dispose of your assets that were not transferred to the trust. As with a will, you can include a provision for a charitable gift in your living trust.

4. Named beneficiariesThe death proceeds from an insurance policy and the balance in an IRA or other retirement account are paid to named beneficiaries (including charities). Through a “pay-on-death” (POD) account you can instruct a bank to pay a named beneficiary what remains in the account at your death. Similarly, through a “transfer-on-death” (TOD) account you can instruct a brokerage firm to transfer assets in your investment account to a designated beneficiary. Assets passed to named beneficiaries are not governed by the will and are not subject to probate. You may name us as a beneficiary of a life insurance policy, retirement fund, or bank or brokerage account.

5. Joint tenancy with right of survivorshipProperty owned in joint tenancy with right of survivorship passes automatically to the surviving joint tenant. For instance, if spouses hold their residence, automobiles, or bank accounts in joint tenancy, the survivor becomes the full owner at the death of the first spouse.

6. Let the state decideIf you do not have a will, any of your remaining assets not transferred through provisions in a living trust, beneficiary designations, or joint tenancy will be distributed to family members and relatives according to the laws of the state in which you reside. State law may or may not reflect your wishes, and it does not allow for charitable gifts.

Charitable gifts can help reduce taxesCharitable gifts by any of the first five means are deductible from your taxable estate. Gifts of retirement funds are an especially tax-efficient way to make a gift. If you are over the age of 70½, you can make a direct transfer from your IRA to our organization and the amount transferred will count towards your required distribution and not be taxed. Whatever your age, you may name us as beneficiary of funds in an IRA, 401(k), 403(b), or other plan and the distributions will not be subject to income tax or estate tax.

You should integrate the waysWhen doing estate planning, it is necessary to integrate the first five ways of transferring property; otherwise, you may have unintended consequences. For example, it might be your intention to treat all of your children equally but if you make them equal beneficiaries in your will but designate one of them as a joint tenant or beneficiary of an account, you will not have achieved that result. Please contact us for more information about transferring assets to reach your charitable objectives.